Talking Point This Week — To And Fro

US President Donald Trump said early on in the week that tariffs on China won’t be as high as 145% and “will come down substantially, but won’t be zero.” He also said he has "no intention" of firing Federal Reserve Chair Jerome Powell, a backtrack from earlier stance. Simultaneously, Tesla chief Elon Musk said he will limit time with the US government and focus on the electric vehicle maker's business. Within this to and fro, the resultant uncertainty on global trade is bringing back a TINA (there is no alternative) feeling among global investors, according to CLSA. It may be showing, with FIIs buying Indian equities worth Rs 8,250 crore—their largest single-day purchase since March 27, on Thursday. And they have bought equities worth Rs 30,000 crore in the last eight trading days. Between all of this, we have had some strong results from Google, a slight miss from Tesla and back home, slightly better numbers from select tech stocks, even as banking names held out. Lets look at the top talking points of this week: All Or Nothing!China demanded the US revoke all unilateral tariffs and said the two sides aren’t even talking, thereby taking a hard line after Trump said overnight that a new and reduced tariff rate may come in the next two to three weeks. Effectively, Trump is reiterating that the US is talking with China on trade even after Beijing’s denial. This marks an interesting twist in the tariff war. Trump’s also said to be considering whether to reduce certain levies targeting the automobile industry. Keep in mind, back home, lawsuits alleging Trump’s tariffs are illegal in the first place continue to pile up. On Wednesday, a dozen US states filed a claim in the US Court of International Trade alleging the President illegally bypassed Congress by issuing the duties under an emergency economic law.Harvard Versus Trump AdministrationWith Harvard refusing to accept demands by the Trump administration that it be allowed to wade into the management of the university, and in response, the administration freezing some $2.2 billion in multiyear grants to Harvard, things are rough. Hence, the decision to sell up to $1 billion of private equity stakes. Note that the US government grants billions more in funding to the school, which it might also hold back. Then there are also tens of millions of dollars that Harvard receives from other government agencies, including the Education Department and the National Institutes of Health, that have already been cut and/or are at risk. And as if that weren’t enough, there is also a proposed hike in the federal tax that Harvard’s and other large endowments pay, which is likely to be jacked up significantly. In addition, the Trump administration has requested that the Internal Revenue Service start the process of revoking Harvard’s tax exempt status, according to The Wall Street Journal. And that is not all!Some Recent Global Opinion On IndiaThe global opinion on India is turning benign to favourable. HSBC Asset Management classified India as a safe harbour, saying that Indian stocks have gained slightly since the ‘Liberation Day’ tariffs were announced, an exception to the rule. With India still exhibiting world-leading GDP and earnings growth, and valuations having corrected over recent months, the case for the country’s equities in the face of global challenges is compelling, according to HSBC. Goldman Sachs Asset Management tends to concur, saying they 'could be' increasing the allocation to India within an Emerging Markets portfolio, and that there can be potential enhancements to the information ratio by achieving higher annualised excess returns without significantly increasing return volatility. Chris Wood of Jefferies, in his latest note last week, tells global investors to continue to reduce positions in favour of Europe, China and India. And not necessarily global, but CLSA's Vikash Jain believes that uncertainty on global trade is bringing back a TINA feeling among global investors.US Un-ExceptionalismThe widely watched Bank of America global fund-manager survey released last week found professional investors voting the opposite way, with a record number of respondents intending to sell US stocks. In fact, HSBC believes that the weakness in the dollar again last week underscores that a capital outflow is in progress. Maybe all this begins to persuade international investors to partly hedge US exposures? Something that was almost unheard of during the years of US exceptionalism. Very few have been surprised to see the dollar weaken in the wake of the announced higher tariffs and are raising questions about whether the weakening is reflecting a loss of appetite for US assets! When did we last see this?Finally, I end on a sour note. Prices for coffee and cocoa zoomed higher due to poor global harvests and strong demand earlier, shattering records set way back in the 1970s. Although prices have since moderated, they remain well above long-term averages, and according to some experts these are not going to change soon. While gold is the big glitter, this shows there are others which are as noteworthy, but not so. As I head to Omaha for the Berkshire Hathaway AGM, the hope is that I can write about the experience as this newsletter next week.Until Next Time... Niraj Shah

Talking Point This Week — To And Fro

Trump is reiterating that the US is talking with China on trade even after Beijing’s denial. This marks an interesting twist in the tariff war.

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Talking Point This Week — To And Fro

Trump is reiterating that the US is talking with China on trade even after Beijing’s denial. This marks an interesting twist in the tariff war.

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